Doximity Stock Just Got Crushed. Is This a Rare Chance to Buy a High-Quality Growth Company on Sale?
Key Points
The market seems concerned that AI could replace some of Doximity's solutions for the medical community.
However, its powerful ecosystem, paired with complex regulations, shouldn't be easily disrupted.
The stock currently trades at a modest multiple and could soar as pharmaceutical ad spending rebounds.
- 10 stocks we like better than Doximity ›
Shares of the leading digital platform for medical professionals, Doximity (NYSE: DOCS), dropped again earlier in May after the company reported fourth-quarter earnings, and the stock is now down a staggering 56% in 2026.
The big issue on the market's mind is whether the company can survive the threat that AI's rise may pose to Doximity's operations. For instance, the company's Scribe product, which transcribes and generates notes during doctor visits, is a somewhat "common" feature in today's AI-powered world.
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Similarly, its Ask solution is a large language model tailored for doctors -- but may not offer enough differentiation from the leading AI companies today.
Image source: Getty Images.
However, focusing solely on these software risks undermines Doximity's deeply entrenched ecosystem.
First, Doximity is used by more than 85% of U.S. physicians -- a massive network. Second -- and thanks to this access to doctors -- the company counts all of the top 20 pharmaceutical manufacturers as advertising customers. Third, Doximity also counts the top 20 hospitals and healthcare systems as customers, whether for advertising or for its workflow solutions (the potentially disruptive software mentioned earlier).
Simply put, I don't think AI can replicate Doximity's strong ecosystem. In fact, I'd argue that the revolutionary technology could actually make the company's platform even stronger as it continues to incorporate AI into many of its solutions. In the fourth quarter, roughly half of Doximity's 800,000 active prescribers utilizing its workflow solutions used an AI tool. Similarly, seven of the top 20 hospitals purchased the company's new clinical AI suite.
That said, margins dipped in Q4 as Doximity's costs rose amid its "AI investment year," so this is something investors need to focus on in upcoming quarters.
Ultimately, I think the AI fears are overdone -- especially given that HIPAA compliance, strict regulations, and considerable legal ramifications make it incredibly difficult for a big tech company to just "vibe code" a better healthcare AI solution. Trading at just 15 times free cash flow (accounting for stock-based compensation and Doximity's $700 million cash balance), Doximity remains a top buy right now for me, as the cyclical pharma advertising industry should eventually rebound.
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Josh Kohn-Lindquist has positions in Doximity. The Motley Fool has positions in and recommends Doximity. The Motley Fool has a disclosure policy.
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